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Lundbeck: Myriad Deal is a High Risk High Reward Strategy

Posted on: Thursday, 22 May 2008, 11:53 CDT

Lundbeck has acquired the European commercialization rights to Myriad's new Alzheimer's treatment, Flurizan. However, late stage failures are common in the Alzheimer's disease drug pipeline and, as such, Lundbeck is taking on a high risk investment; although the potential rewards are considerable, with forecast revenues of Flurizan in the seven major markets at over $1.5 billion by 2016.

Under the European commercialization agreement, Lundbeck will have rights to market and sell Flurizan (tarenflurbil) in the EU and several associated non-EU countries. Lundbeck has agreed to pay Myriad an initial $100 million and will pay up to $250 million in connection with regulatory approvals. Furthermore, Lundbeck has agreed to pay attractive commercialization milestones and will purchase bulk pharmaceutical material from Myriad. Lundbeck has also agreed to pay escalating royalties of 20-39% on sales less the amount paid for the bulk drug.

The deal benefits from Lundbeck's strong European Alzheimer's disease (AD) presence through the marketing of Ebixa (memantine), which is licensed by Forest in the US under the brand name Namenda. Sales of memantine in the five major European regions (5EU) were estimated at $173 million in 2007, accounting for a 26% share of the 5EU market. However, key European patents for memantine are due to expire in 2014; thus, Flurizan represents a key long-term strategy for Lundbeck to maintain and grow its market share.

Oral Flurizan is currently being studied in two Phase III clinical trials in patients with mild AD. The drug is a purified enantiomer of flurbiprofen, a non-steroidal anti-inflammatory drug, but has been shown to reduce levels of the toxic peptide beta-amyloid 42 by modulating the action of gamma-secretase enzyme. It is widely thought that toxic beta-amyloid in AD brains is responsible for the brain cell death and thus is the cause of the disease. With a potential disease slowing action, Flurizan is an exciting new approach to treating AD and could revolutionize the market.

Nevertheless, the AD drug pipeline is notorious for late stage failures and there is a high risk associated with Flurizan, particularly as published Phase II data have not been convincing of strong efficacy. Results from the Phase III trials are expected later in 2008. As such, Lundbeck is taking a big risk with Flurizan but the potential rewards are great. Assuming launch, Datamonitor forecasts Flurizan to generate revenues in excess of $1.5 billion in the seven major markets and $470 million in the 5EU by 2016. This assumes competition from other high profile, late stage, potentially disease slowing drugs, including Wyeth/Elan's bapineuzumab and Medivation's Dimebon. However, Flurizan would have the advantage of being first-to-market in 2010, approximately one year before the other two therapies.

Source: Datamonitor

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